What to Expect From Red Hat Earnings

Red Hat Inc. (NYSE: RHT) is scheduled to release its fiscal fourth-quarter financial results after the markets close on Monday. The consensus estimates from Thomson Reuters call for $0.61 in earnings per share (EPS) and $618.76 million in revenue. In the same period of last year, it reported $0.52 in EPS and revenue of $543.5 million.

Ahead of the earnings report, Mizuho reiterated a Buy rating for Red Hat with a $94 price target, implying upside of 7% from Friday’s closing price of $87.59. The firm believes that Red Hat is well-positioned in hybrid clouds and expects that the company will see continued benefit from its share gains in Linux, tight partnership with Azure and incremental contribution from its rapidly growing cloud business.

Overall Mizuho expects revenues to be roughly $625 million, versus the guidance of $614 million to $622 million. In terms of profitability, EPS is expected to come in the range of $0.61 to $0.62, compared with the guidance of $0.61.

The firm detailed in its report:

Our checks picked on sustained share gains by Linux/RHEL, traction in the cloud and ongoing attach of OpenShift (container platform) to large deals. Given the business model, investor focus remains on the billings metric, which could remain choppy given recent trends in consumption/payment patterns. For fiscal fourth quarter, we expect billings of $875 million (+15 % Y/Y) vs. consensus of $869 million on revenue outperformance and year-end deferreds build. Further, management will provide year-end backlog, which we expect to post double-digit growth.

In terms of guidance for the coming fiscal year, Mizuho expects management to offer its outlook as $2.70 billion to $2.73 billion in revenue, based on sustained momentum and a robust renewal portfolio. For EPS the firm expects a range of $2.60 to $2.65, as the result of margin expansion. Foreign exchange headwinds could offer some slight downside to estimates.

Shares of Red Hat were last seen at $82.75 on Monday, with a consensus analyst price target of $87.59 and a 52-week trading range of $68.54 to $85.01.